In the first two articles we talked about the prospects of small businesses finally receiving needed capital and some of the sources you can turn to. So assume you have selected a couple of smaller SBA lenders and are now ready to give your pitch. How do you present yourself? What information or documentation should you furnish? Let me tell you it is not going to be easy. Here are some suggestions to soften the blow:
Don't be intimidated. For some reason, people are naturally fearful of meeting bankers. Maybe it is the fact that their personal information will be disclosed or the prospect of rejection. Or simply that their whole livelihood may be at stake (Thanks, Sue, that really gave me a comfort level). Don't be that way. Take the mind set that they are in business to help you. They don't really have ice water in their veins (well, maybe lukewarm on a good day).
Dress appropriately. Unless you're a lawyer or planning to go to a funeral later on, you don't have to dress in a business suit. That's all pass. Business casual is fine, with a clean, well manicured look. That's right. First impressions are everything. In other words, look the part. One of the best impressions I ever received was from a large building contractor who showed up in his company truck with a well-pressed uniform (and company logo) he and his employees use, complete with tools and a hard hat. Well, maybe drop the tools. He just looked like a busy successful contractor.
Leave the hype behind. Bankers absolutely hate the used car sales mentality. You're not selling to one of your customers (Ooch, that hurts). Quiet and understated is good. Stop waving your arms.
Brief and to the point. Heck, they are not making loans anyway and have nothing better to do. Come on--you know that's not true. They like you to get right to the point. And remember actions speak better than words. Talk really is cheap to a banker.
Bring a business folder. I will never forget one meeting I had with a prospective lender in which they brought a well organized business folder (I loved the tabs) with the initial business plan, current financials, and a budget. I didn't ask them to bring it since it was the introductory meeting. This will really impress them. This does not mean you will be turning over the file at the first interview. Let them glance over the file briefly but then find out exactly what they need and tell them you would like to spend a little bit of time putting it in the format they are requesting. Showing you are organized is a good thing.
Meet in person and not by phone. There's no way you can find out if they are interested in loaning you money by phone: "Absolutely, come on in, we'll be happy to discuss it with you." Now that really told me a lot. As far as I know they're only interested in opening up a new account. There's no way you can find that out by a phone call. It disguises their true intentions. It's much harder to bluff in person. That way you can look them in the eye and ask if they're really planning to loan money.
Ask the tough questions. Don't be afraid. You can do it. The typical prospective borrower simply asks their terms, amounts available, and how long it takes. This tells you almost nothing. Here are some better questions: 1) Do you typically loan to small businesses in the same industry as myself? Are there certain industries you stray away from? 2) I'm looking for a bank that specializes in helping small businesses. Are you one? 3) How many small business loans have you personally made in the last 30 days (say this is politely because you're hitting them right between the eyes). Were they unsecured? What were the range of loan amounts? 4) Has your bank held off any in making loans because of the credit crisis? 5) I'm a big boy/girl and you can tell me like it is. Is your bank really making business loans at this point? 6) Are you making unsecured loans at this point? If so, tell me exactly what my qualifications should be? 7) What credit score should I be have? 8) Can you tell me exactly what procedures will be followed after my application, including how long it takes? 8) If you require real estate equity, will it have to be 100% backed by real estate? Will you take trade fixtures and equipment? 9) What debt to equity should I expect (for example, if it is 75%, that means if you have $100,000 in home equity, you would only be able to get $75,000), 10) Are there any special problems or concerns I should know about because of this tough economy? 11) What amount of positive cash flow should I have to support the loan?, and 12) What kind of personal and business financial documents will I be preparing?
Examine your credit report before the interview. Get a recent copy of your credit report at www.annualcreditreport.com. Give the banker a summary of your situation. They're not interested in long stories: "Yeah, my mortgage company was taken over by ABC and they didn't even let me know. I usually get my mail on the first of the month and found out two months later that I was sending it to the wrong place. You know I call this woman in the bank four different times and she told me four different stories. I then talked to her supervisor and he said . . . So I wrote a letter to.... And followed up with a conversation to ... And that was when I was transferred to ... But then I wrote the Better Business Bureau and they said. . . Alright already. We get the point. Don't be so defensive. Be prepared to tell them, short and sweet, the following issues:
1) how many credit cards or other revolving debt you have, and the approximate limits and balances
2) loan balances on your mortgages and the conservative fair market value of your home
3) unsecured loans or lines of credit previously taken out
4) the total amount of debt that you owe
5) the approximate amount of your assets
6) current credit score (that's right, you have to pay extra through Experian to get this, but it is worth it).
Talk to the right person. This might be difficult. You could very well be talking to a lower level person that will have nothing to do with a decision on your loan. Before the meeting, very professionally ask if you can talk to the person who would be primarily making the decision.
What you will use the money for. Bankers love to know precisely what you will be using the money for and how this will increase your income. Simply telling them that you need to expand or use it for cash flow needs is like whistling in the wind.
Talk past performance. Remember, talk is cheap for the future. Everyone claims that they will make millions next year. A banker is more interested in the actual historic figures the last few years.
Positive cash flow. There are some loan programs, such as the SBA Community Express Program that only ask about gross income. But other programs will require your net cash flow. Be prepared to describe it.
Positive, positive, positive. Bankers only want top hear the positive, not the negative. They all know that you need money. But you have to play the game. It is the kiss of death to use such phrases as: "I could really use the money now", "We need this money quickly because of cash flow needs", or "Our business is at a point if we don't receive this money, it will jeopardize its success" (That really shot yourself and the foot). Whatever you do, never used such words as "desperate", "trouble", or "needed it now", even if it is true. Instead, talk in terms of expanding your business to make more income.
They love budgets. It shows you are the type of person who has spent the time to map out future success.
A new bank is OK. Some people think the only chance they have is to make an application with their existing bank they have had for ten years. Wrong. That's no guarantee if they're not interested in loaning. In fact, a new bank might be even more interested because they needed new business and your new business account. Don't be afraid to go to a new bank.
Sue Malone
442 Diablo Road, Suite 137
Danville, CA 94526
Email: info@StrategiesForSmallBusiness.com
Sue Malone is a small business advocate and founder of Strategies For Small Business, a company devoted to providing SBA Loans for small business owners, whether as start-ups or for the expansion needs of existing businesses. For six years she has been the nations #1 provider of SBA Community Express Loans, having funded over 25,000 businesses in all 50 states. For a free loan consultation or for more information on the programs, visit our website at: http://www.StrategiesForSmallBusiness.com Or call (925) 899-8449.
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